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en-usMarket Wrap: Futures Decline; Treasurys Weak On Actavis Mega-Deal, Dollar At 12 Year HighWith little newsflow out of Europe, and just as little on deck out of the US (just NY ISM and auto sales later today), the main overnight events were out of Asia where first the RBA decided to leave rates unchanged (despite the majority calling for a rate cut) when as Bloomberg's Richard Breslow noted, in the RBA communique the central bank "changed their reference to China from “China’s growth was in line with expectations” to “China’s growth will slow a little from last year’s outcome.” Whatever may be happening with China, one thing is clear - either the RBA announcement was leaked a minute early, or HFT algos took a huge gamble and soared higher up to a minute earlier (more shortly).<br />
<br />
Speaking of China, the rate-cut euphoria lasted just one day, and after a feeble 0.8% bounce on Monday, the SHCOMP was down 2.2% this morning over fears the PBOC is doing too little, too late to halt what is now perceived by many as a massive "tightening" capital flight out of China. Finally, Japan made the newsflow, after it JGBs continued to slide following a weak auction, fears that the BOJ is done easing after Abe advisor Etsuro Honda warned against overheating, and after the biggest jump in base pay in over a decade led some to think the BOJ may soon have to halt easing altogether, especially if real wages proceed to rise.<br />
<br />
Another notable development is the ongoing weakness in US rates even as the ECB-buying backstop has made selling of rates in Europe virtually illegal. The weakness in the US 10Y however can be almost entirely attributed to the "mammoth" Actavis-Allergan issue, which is now said to be more than 4x oversubscribed, with nearly $90 billion in orders for just over $20 billion in paper. The result is weakness for matched Treasurys due to rate locks: as InTouch David Fuller's writes watch for “late rate lock unwinds into/out of pricing” though it depends on how big rate lock was Feb. 26 and “whether end-users buy it outright or vs USTs." Once this latest mega issue is absorbed expect the convergence trade to resume.<br />
<br />
Wrapping up the key moves, the dollar index rose modestly to 95.53 this morning, hitting the highest since 2003, as further easing pressure builds on banks around the world as the US marches along to what is seen by many as a de minimus rate hike come hell, high water, or any economic data whatsoever.<br />
<br />
European equities currently reside in modest positive territory in what has been yet another session so far which has been relatively void of pertinent newsflow from the Eurozone. On a sector specific basis, financial names have been placed under some minor pressure in the wake of Barclay’s (-2.8%) pre-market report whereby the Co. increased their provisions for the FX probe by GBP 500mln and said they could not be certain over whether they would need to set aside further provisions. From a fixed income perspective, Bunds initially saw a subdued first half of the session in tandem with the rangebound performance seen across European equities with participants still monitoring the ongoing negotiations between Greece and their Eurozone counterparts with European Commission President Juncker suggesting that a third bailout for Greece has not been discussed. Heading into the North American crossover, Bunds and USTs saw a modest downtick with volumes in the Bund rolling from the March contract to June, while Finland has also opened books on its EUR 3bln 2031 offering. Additionally, Actavis' mammoth nine-part offering is expected to be priced today, with the size of the issuance expected to be in excess of USD 22bln. Note, this placed downward pressure on USTs heading into the close yesterday.<br />
<br />
In FX markets, AUD has managed to hold onto its gains seen overnight after the RBA unexpectedly left its Cash Rate Target steady at 2.25%. Nonetheless, the central bank also signalled further easing by saying it may be appropriate over the period ahead, which capped further AUD gains. Elsewhere, USD-index has recovered off its worst levels amid no fundamental news, although USD/JPY remains in negative territory following comments from Japanese PM Advisor Honda who also said current USD/JPY levels are a kind of an upper limit in the exchange rate’s comfort zone. GBP was granted a brief spell of reprieve following the latest UK construction PMI reading which exceeded expectations (60.1 vs. Exp. 59.1), however, GBP remains relatively unchanged against the Greenback.<br />
<br />
In the commodity complex, spot gold resides in modest positive territory, reversing some of the losses seen during yesterday’s session alongside the strength in US equities. Elsewhere, Copper prices pulled further back from their 7-week highs as Chinese risk sentiment was dampened on IPO concerns after China’s securities regulator approved 24 IPO’s which could lock up a record value of CNY 3trl. In energy markets, both Brent and WTI crude futures trade in the green ahead of the after-market API inventory release with energy newsflow overall relatively light.<br />
<br />
*In summary: *European shares remain higher, though off intraday highs, with the food & beverage and personal & household sectors outperforming and financial services, banks underperforming. RBA leaves rates unchanged, Australian dollar rises. Swiss economy grew faster than forecast before franc cap removal. The French and Italian markets are the best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Japanese 10yr bond yields rise; French yields increase. Commodities gain, with natural gas, copper underperforming and Brent crude outperforming. U.S. ISM New York, vehicle sales, IBD/TIPP economic optimism, due later.<br />
<br />
*Market Wrap*<br />
<br />
· S&P 500 futures down 0.1% to 2112.5<br />
· Stoxx 600 up 0.2% to 392.2<br />
· US 10Yr yield up 2bps to 2.1%<br />
· German 10Yr yield up 1bps to 0.37%<br />
· MSCI Asia Pacific up 0.1% to 146.3<br />
· Gold spot up 0.1% to $1208.2/oz<br />
· 56% of Stoxx 600 members gain, 42% decline<br />
· Eurostoxx 50 +0.2%, FTSE 100 +0.1%, CAC 40 +0.3%, DAX +0.2%, IBEX -0.1%, FTSEMIB +0.2%, SMI -0.1%<br />
· Asian stocks little changed with the Sensex outperforming and the Shanghai Composite underperforming.<br />
· MSCI Asia Pacific up 0.1% to 146.3<br />
· Nikkei 225 down 0.1%, Hang Seng down 0.7%, Kospi up 0.2%, Shanghai Composite down 2.2%, ASX down 0.4%, Sensex up 0.5%<br />
· Euro down 0.13% to $1.117<br />
· Dollar Index up 0.03% to 95.49<br />
· Italian 10Yr yield up 0bps to 1.35%<br />
· Spanish 10Yr yield down 0bps to 1.35%<br />
· French 10Yr yield up 2bps to 0.66%<br />
· S&P GSCI Index up 0.8% to 416.4<br />
· Brent Futures up 2.1% to $60.8/bbl, WTI Futures up 1.5% to $50.3/bbl<br />
· LME 3m Copper down 0.9% to $5850/MT<br />
· LME 3m Nickel down 0.8% to $13740/MT<br />
· Wheat futures up 0.3% to 501.3 USd/bu<br />
<br />
*Bulletin Headline Summary From RanSquawk and Bloomberg*<br />
<br />
· European newsflow is relatively quiet so far with participants now awaiting the US’ arrival to the market<br />
· AUD manages to hold onto its overnight gains after the RBA refrained from cutting rates, although warned that further easing may be appropriate over the period ahead<br />
· Looking ahead, today sees the release of Canadian GDP at 1330GMT/0730CST<br />
· Treasuries extend yesterday’s decline before Actavis prices 9-part deal that could be second-largest on record; market focus also on Friday’s payrolls and average hour earnings data.<br />
· Order book for Actavis deal said to be around $90b; pricing expected today<br />
· Global banks are EU305b ($341b) short of a target for easy-to-sell assets intended to prevent another financial crisis, according to the latest data from the Basel Committee on Banking Supervision; LCR takes full effect in 2019<br />
· Draghi will have an opportunity at ECB meeting Thursday to add to details of the EU1.1t QE plan announced in January; will also unveil the ECB’s first growth and inflation forecasts for 2017, numbers that will have significance for program’s duration<br />
· ECB’s QE plan might have already blown a EU92b hole in defined-benefit pension plans by depressing bond yields, S&P said Feb. 26; if the actual start of QE pushes yields further, for longer, companies may have to take drastic measures to make ends meet, and could face a hit to their credit ratings<br />
· Reserve Bank of Australia said further interest-rate cuts could be needed to bolster growth after it unexpectedly left its benchmark unchanged<br />
· PBOC Deputy Governor Yi Gang says he doesn’t see urgent need to change yuan band, current range for yuan trading is “much more flexible than before”<br />
· The Swiss economy grew twice as fast as economists forecast at the end of 2014, indicating resilience before the central bank scrapped a currency cap that was shielding exporters<br />
· Hillary Clinton used personal e-mail account to conduct govt business as secretary of state, State Department officials say, and may have violated federal requirements that official correspondence be retained as part of agency’s record: NYT<br />
· Sovereign 10Y yields higher. Asian stocks mostly lower. European stocks stocks gain; U.S. equity-index futures decline. Crude higher; gold little changed, copper falls<br />
<br />
*US Economic Data*<br />
<br />
· 9:45am: ISM New York, Feb. (prior 44.5)<br />
· 10:00am: IBD/TIPP Economic Optimism, March, est. 47.5 (prior 47.5)<br />
· Wards Total Vehicle Sales, Feb., est. 16.7m (prior 16.56m)<br />
· Wards Domestic Vehicle Sales, Feb., est. 13.4m (prior 13.31m)<br />
<br />
*DB's Jim Reid completes the overnight news roundup*<br />
<br />
Over the last few weeks it feels like there's been a big story to talk about everyday. We had the build-up and announcement of ECB QE, the SNB shock, the Greece story, negative bond yields and numerous central banks easing across the globe. This morning it feels like we're in a little lull and the story that has caught our eye most over the last 24 hours is purely a sentimental one. Yesterday the NASDAQ closed above 5000 for the first time since March 2000. At the time we have fond memories of showing a graph of the S&P 500 after 1929, pointing out that after that bubble burst, it took until 1954 for the index to scale its former peak. Well on this measure the NASDAQ has done rather well, only taking 15 years to get close to its old peak (of 5049).<br />
<br />
The NASDAQ 2000 bubble and the current negative government bond yields are linked in our opinion. Over the last 15-20 years policy makers have tried to limit the fall-out from various major shocks/events by very aggressive stimulus not seen before in history. No bubble has been allowed to fully correct naturally without such intervention. To cut a long story short this has ensured rolling bubbles through the financial system (equities, finance, housing, credit, private debt) and there's little doubt in our mind that there is a now a bubble in parts of the government bond market as a result of this policy super-cycle. It’s very hard to say when this bond bubble will burst as indeed its needed to some degree to smoothly finance the mountain of debt we have. However it will likely burst in some form eventually. The best case scenario for this to unwind and avoid a financial crisis will be for bond holders to take a slow and long haircut via inflation. There is precedent for this as US and UK government bond investors saw their investments half in real-terms in the 35 years that followed WWII after a large debt build up. A stunningly bad period for fixed income returns but one without defaults.<br />
<br />
The conclusion from this is that we believe there are long cycles in markets. When equities are chronically overvalued they can easily go nowhere for a couple of decades. However when bonds are chronically over-valued you may either never get your money back or have it eroded aggressively by inflation. Fascinating times. I'm really not sure how central banks get out of this one longer-term without serious damage. However the start of the resolution to this story could still be someway ahead.<br />
<br />
While we're on this subject a reminder that yesterday we published a note looking at the record monthly run of positive total returns of the iBoxx Euro indices. In the note we showed that the government benchmark to these indices was now negative for the first time and the credit index now below 1% (also for the first time). We also showed that a 2bps increase in yields in a month was now enough for a negative total return for Euro credit indices. So while we still like spreads, periodic negative total return months are becoming inevitable.<br />
<br />
Following on from this yesterday was a day of rising bond yields. 10y Bunds rose 2.7bps to 0.354% which much of the move coming late in the day whilst US Treasuries went back above 2% climbing 8.9bps to 2.082%. It was weaker day across the Treasury curve in fact as 2y yields closed at 0.662% (+4.4bps) and are now just off the 2015 highs in yield we saw back in early January (0.665%). Although yesterday’s macro data was mixed, there was enough in it to disturb bonds a little. Following the weak Chicago PMI on Friday, it was all eyes on the ISM manufacturing yesterday afternoon in the US which, despite falling 0.6pts to 52.9 and the lowest reading since January last year, was more or less in line with expectations (53.0) and helped abate some of the earlier fears from Friday’s shock reading. In conjunction with the better sentiment from the China move over the weekend, the S&P 500 closed +0.61% - offsetting three previous days of decline to record a fresh record high.<br />
<br />
Data elsewhere in the US was largely mixed. Both personal income (+0.3% mom vs. +0.4% expected) and personal spending (-0.2% mom vs. -0.1% expected) were a touch below expectations. The PCE deflator was as expected with the energy influenced headline down to +0.2% yoy (from +0.8%) and the core unchanged at +1.3% yoy. Meanwhile, in contrast to the ISM print, the final reading of the Markit manufacturing PMI rose 0.8pts to 55.1 in February. Finally the ISM price paid was unchanged at 35 (although below expectations of 37.5) and construction spending surprised to the downside (-1.1% mom vs. +0.3% expected).<br />
<br />
Meanwhile in Europe yesterday, focus was on the inflation print for the Euro-area which helped support a move wider in bond yields across the region. The headline CPI estimate of -0.3% yoy for February was down three-tenths of a percent from January but came in a touch ahead of expectations (-0.4% yoy) whilst the final core reading for the month was unchanged at +0.6% yoy. Elsewhere, it was case of generally mixed prints. Unemployment came in below consensus (11.2% vs. 11.4% expected) whilst the final February manufacturing PMI print for the region was revised down a tenth to 51.0 as Germany was revised up (51.1 vs. 50.9 previously) but offset by a lower revision for France (47.6 vs. 47.7 previously). Meanwhile the preliminary February manufacturing PMI reading for the UK was firmer than expected at 54.1 (vs. 53.3) – and was in fact the highest reading since July last year.<br />
<br />
Despite the better than expected inflation print, bourses in Europe were generally subdued with the Stoxx 600 finishing -0.23% and DAX +0.08%. Energy stocks (-1.30%) were a notable drag however after Brent (-4.86%) in particular took a sharp leg lower.<br />
<br />
There was further chatter in Greece yesterday after the Spanish economy minister, Luis de Guindos, suggested that the Eurogroup were looking at a third bailout package for Greece worth in the range of €30bn - €50bn. Specifically, Guindos was quoted on the FT as saying that ‘we are negotiating a third rescue for Greece’ which would likely provide for ‘flexibility’ and include new attached conditions. The suggestions of a third package is not a surprise although it’s the first signs from Euro members that talks of such nature have happened beyond just the extension of the current programme. Attention in the near term however continues to be on current financing for Greece with continued worries that the government is due to run out of cash this month. An upcoming T-Bill auction tomorrow will be watched closely given the €1.4bn maturing on Friday for the nation as well as a €300m IMF repayment. With tensions clearly running high on the current liquidity position, according to the UK Telegraph, the Greek economy minister Stathakis was reported as saying that the government could also draw upon various central bank deposits including pension reserves.<br />
<br />
Quickly glancing over our screens this morning, focus has been on Australia in large part following the RBA meeting in which the Central Bank has, to some surprise, kept rates on hold – however there was some indication in the statement that further rate cuts could be appropriate over the near term. The AUD has rallied around +0.8% versus the Dollar following the news whilst the ASX has fallen 0.42% as we type.<br />
<br />
Elsewhere, bourses are generally mixed. The Shanghai Comp (-1.12%) is weaker whilst the Nikkei (-0.04%) and Hang Seng (-0.05%) are largely unchanged and the Kospi (+0.24%) is higher. In terms of the day ahead, it’s a lighter calendar in Europe today with Euro-area PPI, German retail sales and Spanish employment data all due up. Meanwhile across the Atlantic this afternoon in the US we’ve got the ISM NY, IBD/TIPP economic optimism index and February vehicle sales data all due.
Reported by Zero Hedge 7 hours ago.
http://www.onenewspage.com/n/Markets/754y89gfy/Market-Wrap-Futures-Decline-Treasurys-Weak-On-Actavis.htm
MarketsTue, 03 Mar 2015 12:03:37 +0000http://www.onenewspage.com/n/Markets/754y89gfy/Market-Wrap-Futures-Decline-Treasurys-Weak-On-Actavis.htmSwiss economy stronger than expected in 4th quarterBERLIN (AP) — Official data show that Switzerland's economy expanded by a stronger-than-expected 0.6 percent in the fourth quarter, the last before the country's central bank abandoned its effort to cap the Swiss franc's value against the euro. The State Secretariat for Economic Affairs said Tuesday private and public spending helped fuel the economy, while a drop in imports outpaced a 1-percent export slide.
Reported by SeattlePI.com 8 hours ago.
http://www.onenewspage.com/n/Business/754y89eiw/Swiss-economy-stronger-than-expected-in-4th-quarter.htm
BusinessTue, 03 Mar 2015 10:34:52 +0000http://www.onenewspage.com/n/Business/754y89eiw/Swiss-economy-stronger-than-expected-in-4th-quarter.htmPound Rises Against Euro, Franc As U.K Construction PMI Hits 4-month HighBRUSSELS (dpa-AFX) - The British pound strengthened against the euro and the Swiss franc in the early European session on Tuesday, after data showed that U.K. construction sector expanded strongly...
Reported by FinanzNachrichten.de 8 hours ago.
http://www.onenewspage.com/n/Markets/754y89edc/Pound-Rises-Against-Euro-Franc-As.htm
MarketsTue, 03 Mar 2015 10:28:39 +0000http://www.onenewspage.com/n/Markets/754y89edc/Pound-Rises-Against-Euro-Franc-As.htmSwiss Franc Falls Amid Risk AppetiteBRUSSELS (dpa-AFX) - The Swiss franc extended its early lows against the other major currencies in the early European session on Tuesday amid risk appetite, as investor sentiment were bolstered by...
Reported by FinanzNachrichten.de 9 hours ago.
http://www.onenewspage.com/n/Markets/754y89dif/Swiss-Franc-Falls-Amid-Risk-Appetite.htm
MarketsTue, 03 Mar 2015 09:43:11 +0000http://www.onenewspage.com/n/Markets/754y89dif/Swiss-Franc-Falls-Amid-Risk-Appetite.htmSwiss Franc Extends Fall Against MajorsBRUSSELS (dpa-AFX) - The Swiss franc extended its early lows against the other major currencies in the early European session on Tuesday. The Swiss franc fell to more than 1-1/2-month lows of 0.96...
Reported by FinanzNachrichten.de 10 hours ago.
http://www.onenewspage.com/n/Markets/754y89cpb/Swiss-Franc-Extends-Fall-Against-Majors.htm
MarketsTue, 03 Mar 2015 08:59:44 +0000http://www.onenewspage.com/n/Markets/754y89cpb/Swiss-Franc-Extends-Fall-Against-Majors.htmFranc Little Changed After Swiss 4Q GDP DataBRUSSELS (dpa-AFX) - At 1:45 am ET Tuesday, Switzerland's Federal Statistical Office published quarterly national accounts for the fourth quarter.After the data, the Swiss franc changed little aga...
Reported by FinanzNachrichten.de 12 hours ago.
http://www.onenewspage.com/n/Markets/754y89aov/Franc-Little-Changed-After-Swiss-4Q-GDP-Data.htm
MarketsTue, 03 Mar 2015 07:05:16 +0000http://www.onenewspage.com/n/Markets/754y89aov/Franc-Little-Changed-After-Swiss-4Q-GDP-Data.htmSwiss Franc Falls Against MajorsBRUSSELS (dpa-AFX) - The Swiss franc weakened against the other major currencies in the late Asian session on Tuesday.The Swiss franc fell to a 5-day low of 124.84 against the yen, from an early h...
Reported by FinanzNachrichten.de 12 hours ago.
http://www.onenewspage.com/n/Markets/754y89a9u/Swiss-Franc-Falls-Against-Majors.htm
MarketsTue, 03 Mar 2015 06:49:47 +0000http://www.onenewspage.com/n/Markets/754y89a9u/Swiss-Franc-Falls-Against-Majors.htmGAM Holding AG reports underlying net profit of CHF 177.2 million for 2014Zurich, 3 March 2015<br />
<br />
*Underlying pre-tax profit of CHF 216.7 million, down 7% from 2013, with cost reductions partly compensating for lower performance fees*<br />
<br />
*Underlying net profit of CHF 177.2 million, down 16% year-on-year, reflecting the effects of a return to a more normalised tax rate of 18.2% (9.8% in 2013) and the decline in performance fees*<br />
<br />
*IFRS net profit of CHF 169.0 million, of which CHF 165.8 million attributable to GAM Holding AG shareholders*<br />
<br />
*Investment management with net new money inflows of CHF 2.4 billion; assets under management up 9% to CHF 76.1 billion*<br />
<br />
*Private labelling assets under management of CHF 47.1 billion, up 6% from currency and market performance; net new money outflows of CHF 0.8 billion*<br />
<br />
*Cost/income ratio unchanged at 65.2%*<br />
<br />
*Proposed dividend of CHF 0.65 per share, unchanged from previous year*<br />
<br />
*Mid-term growth initiatives announced:*<br />
<br />
· *Balance geographic and product footprint with new funds and teams*<br />
· *Leverage DNA as leading alternative / absolute return investors*<br />
· *Capitalise on and expand multi-asset class capabilities*<br />
· *Enhance operating leverage: simplification of brand architecture, optimisation of operating model and product lifecycle management*<br />
<br />
*Mid-term targets: strategic initiatives designed to achieve annualised growth of basic earnings per share in excess of 10% and a cost/income ratio of 60-65% over a business cycle*<br />
<br />
* <br />
2014 Group results in detail ^[1] *<br />
<br />
Adjusted for certain non-cash and non-recurring items, the Group's underlying pre-tax profit for 2014 was CHF 216.7 million, 7% lower than in 2013. A decline in performance fees was partly offset by cost reductions.<br />
<br />
Operating income totalled CHF 623.5 million (down 7% year-on-year), mainly due to the fluctuation in performance fees. Net management fees and commissions, which represent around 85% of the Group's overall operating income, held up well, with a 2% decline attributable to a shift in the asset mix towards a greater share of directional equity and fixed income products.<br />
<br />
Underlying net profit for 2014 fell 16% year-on-year to CHF 177.2 million - a more pronounced decrease than on a pre-tax basis. It reflects a more normalised tax rate from the exceptionally low levels of 2013, when the Group benefited from the release of tax accruals and tax deductions from share-based payments.<br />
<br />
Basic earnings per share were CHF 1.07 and declined less than underlying net profit (by 15%), due to the reduction in the number of shares outstanding through the Group's on-going share buy-backs.<br />
<br />
Operating expenses, at CHF 406.8 million, were also reduced by 7%, in line with operating income, demonstrating the Group's flexible cost base. Personnel expenses fell by 9%, largely driven by lower contractual and discretionary bonus payments, a significant decline in the social security expenses for share-based payments and also lower severance payments. Non-recurring credits relating to expenses booked in prior years as well as lower consulting fees led to a 3% reduction in general expenses.<br />
<br />
The Group's cost/income ratio was unchanged from 2013 at 65.2%.<br />
<br />
Alexander S. Friedman , Group CEO, said: "Overall, 2014 demonstrated that our business model is working. At a time when active investment management faced fundamental challenges at an industry level, our unique business mix served to effectively ensure profit resilience and asset growth."<br />
<br />
*Investment management assets and flows*<br />
<br />
Assets under management in investment management at year-end 2014 were CHF 76.1 billion, compared with CHF 69.8 billion a year earlier. The 9% increase was driven by robust net new money inflows, the strengthening of the US dollar against the Group's Swiss franc reporting currency in the second half of 2014, as well as a positive impact from market performance.<br />
<br />
Net new money inflows of CHF 2.4 billion were reflective of healthy underlying business momentum across the year, signalling a return to growth after the net outflows of CHF 2.6 billion recorded in 2013. While net new money results for 2014 include assets of CHF 361 million acquired with US-based mortgage-backed specialist Singleterry Mansley Asset Management in June, they were predominantly driven by broad-based inflows across the Group's existing product range and franchise. Particularly strong contributions came from specialised fixed income strategies, strongly performing directional equity funds and long/short equity strategies, which were the fastest growing product category in the Group's absolute return offering.<br />
<br />
These positive flows more than compensated for cyclical redemptions in concentrated areas, partly due to market sentiment (physical gold ETF, local emerging bond strategy). Due to temporary performance headwinds, the Group's large unconstrained / absolute return bond strategy experienced outflows from the financial intermediaries channel, a segment that is very susceptible to performance fluctuations. With its 10-year track record of capital protection and solid returns across market cycles, however, the unconstrained / absolute bond strategy continued to win substantial inflows from institutional investors particularly in the US and Australia.<br />
<br />
*Private labelling assets and flows*<br />
<br />
Assets under management in private labelling (which represents approximately 7% of the Group's revenues) stood at CHF 47.1 billion on 31 December 2014, up from CHF 44.6 billion a year earlier. This development was driven by the positive impact of market performance and foreign exchange movements, more than offsetting net new money outflows of CHF 0.8 billion. Redemptions from clients of the Group's private labelling partners as well as the closure of certain partnerships could not be compensated by new mandate wins and the expansion of existing relationships.<br />
<br />
*Dividend and capital management*<br />
<br />
Subject to shareholders' approval at the upcoming Annual General Meeting (AGM) on 30 April 2015, the Board of Directors plans to pay a dividend of CHF 0.65 per share for the 2014 financial year, unchanged from the previous year. This will represent a nominal pay-out of approximately 60% of the Group's 2014 underlying net profit. The dividend will again be paid from capital contribution reserves and will therefore be exempt from Swiss withholding tax.<br />
<br />
In addition to the proposed dividend payment, in 2014 the Group returned CHF 53 million of cash and capital to its shareholders through the buy-back of 3.27 million of its own shares for cancellation. Of these, 1.23 million shares were repurchased as part of its former buy-back scheme, which expired in April 2014, and 2.04 million shares as part of its current programme, which started on 28 April 2014. This programme allows for the repurchase of up to 16.7 million shares over a maximum period of three years.<br />
<br />
The Group's balance sheet continues to be highly liquid (cash and cash equivalents of CHF 643.9 million at year-end 2014) and strongly capitalised (tangible equity of CHF 540.6 million), and we have no financial debt. The strong cash flow generation of the Group's operating activities, combined with low capital consumption, forms a solid basis for a continued policy of shareholder distributions. At the same time, it provides the Group with good strategic flexibility.<br />
<br />
*Mid-term growth initiatives*<br />
<br />
The Group has undertaken a focused growth agenda for the coming years. It builds on today's strengths and addresses attractive secular industry opportunities through the following initiatives:<br />
<br />
· *Balance geographic and product footprint:* From its strong presence in the UK and Continental Europe, GAM Holding will expand its investment and distribution footprint in the US, the world's largest pool of institutional assets, and in Asia, where wealth creation will continue to support industry growth. Investments in organic growth will be complemented by distribution partnerships and focused acquisitions, targeted at balancing the Group's geographic reach and its investment capabilities, adding competencies in areas such as equities, multi-asset solutions, credit and distressed assets as well as other alternative solutions.<br />
<br />
· *Leverage DNA as leading alternative / absolute return investors:* In an industry increasingly bifurcated between low-cost passive products and highly active, absolute return / alternative strategies and solutions, GAM Holding will focus on the latter. Building on its successful track record - demonstrated also by its position as the number two provider of alternative UCITS globally ^[2] - the Group will continue to broaden its range of alternative / absolute return strategies, offering them in the form of onshore funds or as customised solutions.<br />
<br />
· *Capitalise on and expand existing multi-asset class capabilities:* The current environment of low yields and divergent monetary policy increases the need for 'outsourced Chief Investment Officer solutions', designed to help pension funds, high-net-worth individuals, family offices, charities, endowments and their financial advisers in making complex allocation and investment decisions across asset classes. With 30-plus years of experience, the Group already manages approximately CHF 12.5 billion in traditional multi-asset class portfolios and CHF 5.2 billion in alternative investments solutions. In order to build a cohesive offering and increase its market penetration, it is now pooling its multi-asset class capabilities and strengthening the investment process and will invest further in this area. Over time, the current relative return, absolute return and risk-rated offerings will be complemented by income solutions, all of them using a variety of instruments ranging from single securities to funds, including third-party products and passive instruments.<br />
<br />
· *Enhance operating leverage:* GAM Holding will complement its growth efforts with a search for greater efficiency. By eliminating internal complexity, the Group will maintain a strong grip on costs and over time enhance the operating leverage of its strategic initiatives. In the near term, it will focus on the following areas:<br />
<br />
* Simplification of the brand architecture: * In the coming months, the Group will discontinue the use of the Swiss & Global Asset Management name. Instead it will strengthen GAM as the Group's sole master brand and focus on positioning the two product brands - GAM and Julius Baer Funds - which have complementary strengths in different markets and client segments. A more straightforward approach to branding will be accompanied by intensified content marketing activities.<br />
<br />
* Optimisation of operating model: * With the establishment of centralised leadership over its company-wide operations function, the Group has started to analyse the entire operations and technology ecosystem supporting its investment capabilities and product offering. The objective of this effort is to achieve greater consistency and efficiency across processes and systems without sacrificing scope and diversification.<br />
<br />
* Product lifecycle management: * Over the past five years, the Group has successfully diversified its product offering towards a broad range of high-growth and higher margin segments. The constant drive for innovation and expansion, and hence a growing seeding pipeline, require a structured and disciplined management of the product shelf, including focused support for growth areas and the repositioning of products with low prospects for future growth.<br />
<br />
*Mid-term financial targets*<br />
<br />
Over a business cycle, the Group will aim to achieve the following targets (all calculated on the basis of underlying net profit):<br />
<br />
· Grow profitability in a sustainable fashion, measured by *annualised growth in basic earnings per share in excess of 10%*<br />
· Build a business that is robust and resilient across a variety of market conditions and cycles, by constantly improving efficiency and operating leverage, expressed by a *cost/income ratio of 60 to 65%.*<br />
<br />
Net new money growth is one of the key drivers of profitability and operating leverage, and is therefore reflected in the mid-term targets above. For this reason, the Group has decided no longer to include a specific quantitative target for annualised net new money growth (previously set at 5 to 10% in investment management and 5% in private labelling).<br />
<br />
*Outlook*<br />
<br />
Alexander S. Friedman , Group CEO, said: "There is little doubt that in 2015 we will have to come to terms with elevated levels of market volatility. A striking reminder of this was provided earlier this year, when the Swiss National Bank abandoned the minimum Swiss franc exchange rate against the euro. While the abrupt appreciation of the franc in January did not cause us any immediate losses and had no material impact on our investment strategies, it underscores the need to manage our cost structure optimally.<br />
<br />
With monetary policies around the globe starting to diverge, and the pace of economic recovery highly uneven, asset managers operate in a challenging environment. However, we believe that for truly active investors like ourselves, increased volatility offers the opportunity to produce attractive alpha through conviction investing.<br />
<br />
Our strategy is focused on driving growth while ensuring we are strong and flexible enough to withstand the inevitable headwinds and surprises in today's market environment. We are confident in our ability to deliver successfully on our growth ambitions."<br />
<br />
The presentation for media, analysts and investors on GAM Holding AG results for 2014 will be webcast on 3 March 2015 at 9 am (CET). Materials relating to the results (presentation slides, Annual Report 2014 and press release) are available at www.gam.com .<br />
<br />
*Forthcoming events:*<br />
<br />
*21 Apr 2015* Interim management statement Q1 2015<br />
*30 Apr 2015* Annual General Meeting<br />
*5 May 2015* Ex-dividend date<br />
*6 May 2015* Dividend record date<br />
*7 May 2015* Dividend payment date<br />
*11 Aug 2015* Half-year results 2015<br />
*20 Oct 2015* Interim management statement Q3 2015<br />
<br />
*For further information please contact:*<br />
<br />
Media Relations:<br />
Larissa Alghisi Rubner<br />
T: +41 (0) 58 426 62 15<br />
<br />
Investor Relations:<br />
Patrick Zuppiger<br />
T: +41 (0) 58 426 31 36<br />
<br />
*Notes to editors*<br />
<br />
*About GAM Holding AG*<br />
<br />
GAM Holding AG is an independent, pure-play asset management group with a focus on active investing. With global distribution networks and investment teams based in five investment centres in Europe, the US and Asia, it delivers investment solutions to institutions, intermediaries and private clients through two leading brands - Julius Baer Funds and GAM. The Group's investment management business is complemented by a private labelling unit, which provides outsourcing solutions for third parties.<br />
<br />
Headquartered in Zurich, GAM Holding AG is listed on the SIX Swiss Exchange and is a component of the Swiss Market Index Mid (SMIM) with the symbol "GAM". The Group has assets under management of CHF 123.2 billion (as at 31 December 2014) and employs over 1,000 staff in 11 countries.<br />
<br />
*Disclaimer regarding forward-looking statements*<br />
<br />
This press release by GAM Holding AG ('the Company') includes forward-looking statements that reflect the Company's intentions, beliefs or current expectations and projections about the Company's future results of operations, financial condition, liquidity, performance, prospects, strategies, opportunities and the industry in which it operates. Forward-looking statements involve all matters that are not historical facts. The Company has tried to identify those forward-looking statements by using words such as 'may', 'will', 'would', 'should', 'expect', 'intend', 'estimate', 'anticipate', 'project', 'believe', 'seek', 'plan', 'predict', 'continue' and similar expressions. Such statements are made on the basis of assumptions and expectations which, although the Company believes them to be reasonable at this time, may prove to be erroneous.<br />
<br />
These forward-looking statements are subject to risks, uncertainties, assumptions and other factors that could cause the Company's actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Important factors that could cause those differences include, but are not limited to: changing business or other market conditions, legislative, fiscal and regulatory developments, general economic conditions, and the Company's ability to respond to trends in the financial services industry. Additional factors could cause actual results, performance or achievements to differ materially. The Company expressly disclaims any obligation or undertaking to release any update of or revisions to any forward-looking statements in this press release and any change in the Company's expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable law or regulation.<br />
--------------------<br />
<br />
^[1] The *result for 2014* has been adjusted to exclude the increase of CHF 5.9 million relating to the deferred liability from the acquisition of Arkos in 2012 and the impairment of investments of CHF 2.3 million. Including these items, the Group's net profit for 2014 amounted to CHF 169.0 million, as shown in the Consolidated Financial Statements.<br />
The *result for 2013* has been adjusted to exclude the gain from the sale of the Group's investment in Artio of CHF 13.1 million, the amortisation of customer relationships of CHF 11.6 million (now fully amortised), the impairment of investments of CHF 5.8 million and office move expenses of CHF 4.5 million (net of taxes). Including these items, the Group's net profit for 2013 amounted to CHF 201.4 million, as shown in the Consolidated Financial Statements. <br />
<br />
^[2] Absolut Research, Absolut monitor alternative UCITS, Q4 2014.<br />
<br />
English Press Release<br />
--------------------This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.<br />
<br />
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.<br />
<br />
Source: GAM Holding AG via GlobeNewswire<br />
<br />
HUG#1898867
Reported by GlobeNewswire 12 hours ago.
http://www.onenewspage.com/n/Press+Releases/754y899zk/GAM-Holding-AG-reports-underlying-net-profit-of.htm
Press ReleasesTue, 03 Mar 2015 06:28:27 +0000http://www.onenewspage.com/n/Press+Releases/754y899zk/GAM-Holding-AG-reports-underlying-net-profit-of.htmEM Rundown: China's Economic Dragon Blowing SmokeIt’s been an interesting start to what promises to be a interesting week in the FX market. The biggest story of Monday’s trade thus far has been the continued strength of the dollar despite disappointing data in the world’s largest economy. European currencies, including the Swiss franc and British pound, are getting hit particularly hard against the greenback. hifting gears to the EM world, traders are still trying to digest the PBOC’s surprise rate cut over the weekend. With economic
Reported by FXstreet.com 22 hours ago.
http://www.onenewspage.com/n/Markets/754y890eg/EM-Rundown-China-Economic-Dragon-Blowing-Smoke.htm
MarketsMon, 02 Mar 2015 21:13:49 +0000http://www.onenewspage.com/n/Markets/754y890eg/EM-Rundown-China-Economic-Dragon-Blowing-Smoke.htmSwiss Companies Battle Strong FrancTiny plastics company Scheu is one of a growing number of Swiss businesses that are exploring extraordinary measures to combat the local currency’s surging value.
Reported by Wall Street Journal 1 day ago.
http://www.onenewspage.com/n/Business/754y88qfv/Swiss-Companies-Battle-Strong-Franc.htm
BusinessMon, 02 Mar 2015 15:14:12 +0000http://www.onenewspage.com/n/Business/754y88qfv/Swiss-Companies-Battle-Strong-Franc.htmGold Demand in U.S., Europe - Reuters Interview GoldCore* *Jan Harvey from Thomson Reuters interviews Mark O'Byrne, Director of GoldCore Research*<br />
<br />
*Jan Harvey* *thomsonreuters.com* We were hearing quite a bit about rising physical demand in Europe earlier this year, as a confluence of factors (euro zone QE, SNB scrapping franc peg to euro, Greek election outcome) came together to support buying. Here to discuss how that has developed in February is Mark O'Byrne, executive director of Goldcore. Welcome, Mark!<br />
<br />
*Mark O’Byrne* *goldcore.com* Happy Friday Jan and thanks for having me on the forum<br />
<br />
*Jan Harvey* thomsonreuters.com Great to have you with us. How have sales this month compared to last?<br />
<br />
*Mark O’Byrne* goldcore.com The month started very strongly with momentum from January but after a busy start demand tapered off as risk appetite returned and gold prices gave up the gains seen in January.<br />
<br />
Jan Harvey thomsonreuters.com How are you expecting that trend to continue as the year progresses?<br />
<br />
*Mark O’Byrne* goldcore.com Overall - sales are marginally down in February on January - down 6%. Price weakness is again making investors hesitant - particularly buyers in the UK and U.S.<br />
<br />
*Mark O’Byrn*e goldcore.com Very difficult to say as a lot of potential "event risk" and obviuosly the price will be important. We are constructive on the price for the year but as ever nervous regarding short term corrections. No crystal balls but the uncertain geopoitical and monetary backdrop is a positive environment for gold. Indeed, we believe global bond and stock markets are looking very toppy and bubbly and material corrections in either market should be beneficial for gold.<br />
<br />
*Mark O’Byrne* goldcore.com Of note is fact that we had 4% more account openings in February than in January despite the drop in sales. Many new clients have funded accounts and are waiting to allocate their funds. With today being the last day of trading in February, this means that March could see good demand.<br />
<br />
*Jan Harvey* thomsonreuters.com How has demand compared in different regions of Europe so far this year?<br />
<br />
*Mark O’Byrne* goldcore.com Unless that is - we see further price weakness or indeed gold going sideways for a period of time - which is also possible although I think unlikely given global demand being quite robust. A sharp fall in the price or indeed a sharp increase in the price will bring out buyers. Sideways trading creates hesitancy, concern and a lack of demand.<br />
<br />
*Mark O’Byrne* goldcore.com We saw an uptick in demand in most countries in January - both English speaking world and other countries. There were a lot of 'events' that led to this demand - Charlie event in Paris, SNB Swiss Franc debacle, Ukraine and tensions with Russia and the start of renewed concerns about Greece<br />
<br />
*Mark O’Byrne* goldcore.com This UK and U.S. demand then tapered off in February - however Greek demand has remained quite high and German demand is robust<br />
<br />
*Mark O’Byrne* goldcore.com Greece saw the greatest increase in demand in January and this continued into the end of February. Gold sovereigns and bars remain the most popular - some for delivery but more for storage, Zurich primarily. British sovereigns remain the traditional favourite of Greek investors - for historical and familiarity reasons.<br />
<br />
*Jan Harvey* thomsonreuters.com Are there any particular products that have been favoured this year?<br />
<br />
*Mark O’Byrne* goldcore.com In general we have not seen any particular gold coin or bar format being favoured (except in Greece). As we deal with investors and some HNW and family offices - they tend to favour bullion in the cheapest format possible. This used to be London Good Delivery bars but kilo bars are increasingly popular for price conscious, sophisticated buyers. Sovereigns remain popular in the UK too as they are CGT free - making them attractive from a total expense point of view.<br />
<br />
*Mark O’Byrne* goldcore.com We have seen no material increase in demand from Italy and Spain where demand remains anaemic. We saw a marked pick up in Russian demand in December when the rouble was collapsing but that has abated now. This included HNW demand for bullion stored in Zurich.<br />
<br />
*Mark O’Byrne* goldcore.com We saw a marked pick up in Russian demand in December and early January when the rouble was collapsing - this included HNW demand for kilo bars and bullion stored in Zurich was favoured. That demand has abated<br />
<br />
*Jan Harvey* thomsonreuters.com How has silver demand compared to gold this year?<br />
<br />
*Mark O’Byrne* goldcore.com That is interesting as ever. Silver demand remains robust and for retail buyers of coins , there remains a propensity to favour silver eagles, maples and philharmonics over gold bullion coins.<br />
<br />
*Mark O’Byrne* goldcore.com Smaller buyers are taking the view that they can get more 'bang for the buck' with 'poor man's gold' and many also believe that silver will outperform gold in a new bull market and we agree with them on this. Many saw how silver outperformed gold in the 1970s and again in the 2000s bull run.<br />
<br />
*Jan Harvey* thomsonreuters.com It had a couple of enormous reversals in 2011, though. Has that made investors a bit warier than they once were about taking a punt on silver?<br />
<br />
*Mark O’Byrne* goldcore.com Has definitely deterred the typical retail investor. But hard core silver bugs love their silver and view all sell off as gifts from the Gods to accumulate the 'metal of the moon' : )<br />
<br />
*Jan Harvey* thomsonreuters.com Ha!<br />
<br />
*Jan Harvey* thomsonreuters.com Thanks Mark. And thank you very much for joining us today!<br />
<br />
*Mark O’Byrne* goldcore.com p.s. dislike term silver bug and gold bug. Pejorative and we don't call people stock roaches or paper bugs or dollar bugs : )<br />
<br />
*Mark O’Byrne* goldcore.com Pleasure Jan. Thank you for the opportunity and enjoy your weekend. Hope we beat you in the rugby in the big game Sunday !<br />
(Ireland versus England in 6 Nations. Result: Ireland 19-9 England)<br />
<br />
<br />
<br />
*MARKET UPDATE*<br />
<br />
Today’s AM fix was USD 1,216.75, EUR 1,084.93 and GBP 789.48 per ounce.<br />
Friday’s AM fix was USD 1,205.00, EUR 1,073.59 and GBP 782.77 per ounce.<br />
<br />
Gold climbed 0.22% percent or $2.70 and closed at $1,211.10 an ounce on Friday, while silver rose 0.18% or $0.03 to $16.57 an ounce. Gold and silver both finished up for the week at 0.84% and 2.09% respectively.<br />
<br />
* <br />
Gold in US Dollars - 5 Years<br />
<br />
Gold in Singapore climbed to its strongest price in almost two weeks, strengthened by firm Chinese demand after an interest rate cut in China which is a positive for the yellow metal. In late afternoon in Singapore, gold bullion was up 0.7 percent at $1,221.40 an ounce its highest since February 17th. In February, gold lost 5.5 percent its most since September 2014.<br />
<br />
Premiums at the Shanghai Gold Exchange (SGE) remained firm near $4-$5 an ounce over the global spot benchmark.<br />
<br />
The Chinese central bank said the 25 bp cut in the benchmark lending and deposit rates "does not represent a change in the direction of monetary policy". However, this is just another example of a central bank employing quantitative easing as the currency wars continue and look set to intensify.<br />
<br />
On Friday, Q4 U.S. economic growth was revised downward to 2.2 percent from 2.6 percent which may have added to safe haven bid for gold. The U.S. non farm payrolls report is at the end of the week and market participants will look to it for further evidence that the US is slowing down.<br />
<br />
India will introduce gold deposit accounts to utilise the 20,000 metric tonnes of gold in the country and launch a sovereign gold bond, the finance minister said on Saturday. A further sign of gold being remonetised.<br />
<br />
India kept the import duty at the record 10 percent in a setback for jewellers and a boon for smugglers.<br />
<br />
Gold in London in late morning is trading at $1,216.65 or up 0.31 percent, while silver is at $16.65 or up 0.37 percent and platinum is at $1,185.50 or up 0.14 percent.<br />
<br />
Breaking News and Updates Here<br />
<br />
www.goldcore.com
Reported by Zero Hedge 1 day ago.
http://www.onenewspage.com/n/Markets/754y88pte/Gold-Demand-in-Europe.htm
MarketsMon, 02 Mar 2015 14:55:17 +0000http://www.onenewspage.com/n/Markets/754y88pte/Gold-Demand-in-Europe.htmFranc Trades Lower As Swiss Manufacturing Activity Contracts FurtherBRUSSELS (dpa-AFX) - The Swiss franc traded lower against its major opponents on Monday's European deals, as Swiss manufacturing activity contracted further in February, and the Swiss National Ban...
Reported by FinanzNachrichten.de 1 day ago.
http://www.onenewspage.com/n/Markets/754y88mzo/Franc-Trades-Lower-As-Swiss-Manufacturing-Activity-Contracts.htm
MarketsMon, 02 Mar 2015 13:24:28 +0000http://www.onenewspage.com/n/Markets/754y88mzo/Franc-Trades-Lower-As-Swiss-Manufacturing-Activity-Contracts.htmGold Demand in Greece, Italy, Spain, Russia, Germany, UK and U.S. - Reuters Interview GoldCoreGold Demand in Greece, Italy, Spain, Russia, Germany, UK and U.S. - Reuters Interview GoldCore Jan Harvey from Thomson Reuters interviews Mark O’Byrne, Director of GoldCore Research Jan Harvey thomsonreuters.com We were hearing quite a bit about rising physical demand in Europe earlier this year, as a confluence of factors (euro zone QE, SNB scrapping franc peg to euro, Greek election outcome) came together to support buying. Here to discuss how that has developed in February is Mark O’Byrne,
Reported by FXstreet.com 1 day ago.
http://www.onenewspage.com/n/Markets/754y88m63/Gold-Demand-in-Greece-Italy-Spain-Russia-Germany.htm
MarketsMon, 02 Mar 2015 12:53:54 +0000http://www.onenewspage.com/n/Markets/754y88m63/Gold-Demand-in-Greece-Italy-Spain-Russia-Germany.htmThousands of Britons lured by Cyprus property dream stung by Swiss franc mortgages - but legal fight means end is in sight<IMG SRC="http://2b851171df65ad243cb4-1e45ef30e4c5d07f2ee97d3ac20cf4ba.r54.cf3.rackcdn.com/144-Thousands-of-Britons-lured-by-Cyprus-property-dream.jpg" ALT="Thousands of Britons lured by Cyprus property dream stung by Swiss franc mortgages - but legal fight means end is in sight">
Buying a property abroad is a retirement or holiday home dream for many Britons lured by the fantasy of beaming sunshine while sipping cocktails contently by the pool.
Reported by MailOnline 1 day ago.
http://www.onenewspage.com/n/Front+Page/754y88lzc/Thousands-of-Britons-lured-by-Cyprus-property-dream.htm
Front PageMon, 02 Mar 2015 12:55:27 +0000http://www.onenewspage.com/n/Front+Page/754y88lzc/Thousands-of-Britons-lured-by-Cyprus-property-dream.htmForex Technical Analysis: EUR/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD, USD/RUB, GoldAnalysis for March 2nd, 2015 EURUSD, “Euro vs US Dollar” Eurodollar continues moving downwards; the market hasn’t been able to form a correction. After reaching new lows, the pair is expected to continue falling towards level of 1.1000. GBPUSD, “Great Britain Pound vs US Dollar” Pound is consolidating. After leaving the channel downwards, the price may reach level of 1.5285. This descending movement may be considered a correctional one. USDCHF, “US Dollar vs Swiss Franc” Franc continues moving
Reported by FXstreet.com 1 day ago.
http://www.onenewspage.com/n/Markets/754y88jgu/Forex-Technical-Analysis-EUR-USD-GBP-USD-USD.htm
MarketsMon, 02 Mar 2015 10:56:18 +0000http://www.onenewspage.com/n/Markets/754y88jgu/Forex-Technical-Analysis-EUR-USD-GBP-USD-USD.htmSwiss Franc Falls As SNB Sight Deposits RiseBRUSSELS (dpa-AFX) - The Swiss franc lost ground against the other major currencies on Monday's European deals, as the Swiss National Bank's sight deposits improved last week, indicating the possi...
Reported by FinanzNachrichten.de 1 day ago.
http://www.onenewspage.com/n/Markets/754y88iow/Swiss-Franc-Falls-As-SNB-Sight-Deposits-Rise.htm
MarketsMon, 02 Mar 2015 10:15:35 +0000http://www.onenewspage.com/n/Markets/754y88iow/Swiss-Franc-Falls-As-SNB-Sight-Deposits-Rise.htmFranc Little Changed After Swiss Manufacturing PMIBRUSSELS (dpa-AFX) - At 3:30 am ET Monday, Switzerland's manufacturing PMI for February was released from Credit Suisse. After the data, the Swiss franc changed little against its major rivals. As...
Reported by FinanzNachrichten.de 1 day ago.
http://www.onenewspage.com/n/Markets/754y88h4x/Franc-Little-Changed-After-Swiss-Manufacturing-PMI.htm
MarketsMon, 02 Mar 2015 08:51:33 +0000http://www.onenewspage.com/n/Markets/754y88h4x/Franc-Little-Changed-After-Swiss-Manufacturing-PMI.htmFranc Mixed Ahead Of Swiss Manufacturing PMIBRUSSELS (dpa-AFX) - At 3:30 am ET Monday, Switzerland's manufacturing PMI for February is due from Credit Suisse. The procure.ch PMI is forecast to fall to 46.9 in February from 48.2 in January.A...
Reported by FinanzNachrichten.de 1 day ago.
http://www.onenewspage.com/n/Markets/754y88h57/Franc-Mixed-Ahead-Of-Swiss-Manufacturing-PMI.htm
MarketsMon, 02 Mar 2015 08:51:33 +0000http://www.onenewspage.com/n/Markets/754y88h57/Franc-Mixed-Ahead-Of-Swiss-Manufacturing-PMI.htmU.S. Dollar Rises Against MajorsCANBERA (dpa-AFX) - The U.S. dollar strengthened against the other major currencies in the Asian session on Monday. The U.S. dollar rose to 0.9552 against the Swiss franc for the first time since ...
Reported by FinanzNachrichten.de 2 days ago.
http://www.onenewspage.com/n/Markets/754y88bf4/Dollar-Rises-Against-Majors.htm
MarketsMon, 02 Mar 2015 02:36:00 +0000http://www.onenewspage.com/n/Markets/754y88bf4/Dollar-Rises-Against-Majors.htmDavid Stockman Warns "It's One Of The Scariest Moments In History"<IMG SRC="http://047ad2fff592c294bf4a-56c3e9e74d6f60565baef0e2da093921.r33.cf3.rackcdn.com/1895-David-Stockman-Warns-It-One-Of-The.jpg" ALT="David Stockman Warns It's One Of The Scariest Moments In History">
"The Fed is out of control," exclaims David Stockman - perhaps best known for architecting Reagan's economic turnaround known as 'Morning in America' - adding that "*people don't want to hear the reality and the truth that we're facing.*" The following discussion, with Harry Dent, outlines their perspectives on the looming collapse of free market prosperity and the desctruction of American wealth as policymakers "take our economy in a direction that is dangerous, that is not sustainable, and is *likely to fully undermine everything that's been built up and created by the American people over decades and decades*." The Fed, Stockman concludes, "is a rogue institution," and their actions have led us to "one of the scariest moments in our history... *it's a festering time-bomb and we're not sure when it will explode*."<br />
<br />
<br />
<br />
Full Discussion:<br />
<br />
<br />
<br />
Full Transcript here.<br />
<br />
*Key Excerpts from the detailed interview:*<br />
<br />
*David Stockman:* *People don't want to hear the reality and the truth that we're facing.* But I think there is an enormous appetite out in the country to get a different perspective than what you have from the media day in and day out, so I say *the fed is out of control. Its balance sheet is exploded. It's printing money like never before.*<br />
<br />
*Zero interest rates for 70 months have basically destroyed the pricing function in the financial markets.* I said that as a result of this, Wall Street has become a huge casino which basically rewards gamblers, but it is not functioning as a capital raising, capital allocating instrument, which really is what the financial markets should do in a free market system. I warned about the size of the federal debt. I'm an old budget director from the Reagan days. We had a trillion dollar national debt, a 3 trillion economy when I started. Today, it's 18 trillion. Eighteen fold gain in the last 35 years versus maybe a fourfold gain in the economy. So all of these trends are taking our economy in a direction that is dangerous, that is not sustainable, and is likely to fully undermine everything that's been built up and created by the American people over decades and decades.<br />
<br />
So people don't want to hear the warning. *They don't want to hear the truth in the establishment, in Wall Street, in Washington, but I think out in the country they must.*<br />
<br />
* * *<br />
<br />
*David Stockman:* Well it's obvious that *Wall Street is addicted to cheap money and unlimited flow of new liquidity into the markets*. Traders can then borrow money on an overnight basis for five basis points, which is nothing. Buy anything with a yield like a ten-year or five-year bond or speculate in stocks that they think might be going up or even get fancier and go into derivatives or commodity futures or whatever. And then capture the profit or the spread between the cheap money that the fed is putting into the overnight market and the yield or profit they're making on the asset, and they're leveraging way up.<br />
<br />
You know, 90 percent, 95 percent in many cases. So obviously, *the whole financial market is dependent on this, but it comes at a cost. It is destroying savers in America. *If you worked a lifetime and saved $100,000.00, you're making $400.00 a year in interest from a lifetime of savings. *I think there will be a revolt sooner or later of the American public against this disastrous crushing of the saver in order to essentially accommodate Wall Street's appetite for liquidity.*<br />
<br />
* * *<br />
<br />
*David Stockman:* Well you know,* the problem is the fed, I've described, is a rogue institution*. It's operating beyond any of the legislative intent or statutory authority that's been given to them over the years. They have essentially become a national monetary planning agency that has decided they can drive the daily, weekly, monthly movement of the economy by manipulating interest rates and the yield curve by putting a put under the stock prices by essentially trying to drive the entire 18 trillion or 17 trillion US economy from Wall Street. *That is fundamentally at variance with the requisites of a healthy capitalist economy. You need an honest financial market. Not a manipulated one.*<br />
<br />
You need price discovery by people that have their money at risk, not the central bank.<br />
<br />
Harry Dent: Actually, it's a centrally planned economy, isn't it?<br />
<br />
David Stockman: Right, exactly.<br />
<br />
* * *<br />
<br />
So David, do you think the republican congress can save us from this economic sundown that we've been discussing today?<br />
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*David Stockman:* Well I would like to think so, and they talk a good game, but *unfortunately when push comes to shove, they're in the consensus with everyone else in the beltway in Washington and are unwilling to take on the hard issues. *We are borrowing still $600 billion in the last year, six years after allegedly the great recession ended, and we are setting ourselves up for trillion dollar deficits again, the next time the economy stumbles or we have a recession or some other dislocation. The fact is the fed is not abolished the business cycle. The fed has not made the world completely safe from these kinds of dislocations. So therefore,* we need to look at what's driving this huge deficit, and the answer is big entitlements and big defense spending, and the republicans are unwilling to take on the Pentagon.* They want more, and they're afraid to take on Social Security and the entitlements because they believe that is going to be problematic politically.<br />
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*So therefore, nothing is being done about the structure of this deficit problem, and we're just basically stumbling our way into another huge crisis in ballooning national debt.*<br />
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*David Stockman:* Well,* it's one of the scariest moments I think in our history,* but also we need to recognize we're in uncharted waters. *No central bank has ever printed this much money this long, kept interest rates at zero, fueled so much speculation. Not just here, but worldwide. Not just in the normal stocks and bonds, but the whole shale boom, for instance, *in the United States was massively funded by cheap debt based on oil prices that weren't sustainable, and now that's all coming unwound. We have never had deficits of ten percent of GDP back to back, or even still four or five percent four or five years into a recovery.<br />
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*We have a runaway budget where the population is getting older and older, 10,000 people are retiring every day. Nothing is being done about Social Security. It's a festering time bomb, and we're not sure how it will explode, but we know it isn't sustainable. *We have a Wall Street that is more addicted to pure overnight gambling and trading and speculation for the ultra short run that is driven by robo traders, the so-called HFT money, like never before. It's unstable. That's why we see things happen like the overnight 40 percent gain with the Swiss Franc when the Swiss National Bank pulled the pay.<br />
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Forty percent overnight – not overnight, but in a couple of minutes or seconds when there were hundreds of billions of short positions in the Swiss Franc. All of these things have never existed simultaneously, not only in the United States, but worldwide. All the central banks are doing it. *We're reaching the point where it's unsustainable, things are going to give and break, but the good thing is it's going to be more a disaster in the financial markets in my view, less some kind of Great Depression impact on Main Street. It will be difficult on Main Street, but Wall Street is in the gun sites of this disaster coming.*<br />
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*David Stockman:* I agree. *In the long run, we have to get off this debt addiction.* We need to get back to sound finance both in government and households, but beginning* between here and there is going to cause enormous pain for millions of households who have been herded into risky investments, junk bond funds, stock market funds, high flying biotech stocks and on and on because they were told it's the only place to be.* If you put your money in a CD, you get no return. If you put your money in a safe bond, you get almost no return. Now when the big reset, as Harry calls it, happens, and* the stock market drops by large magnitudes, 50 percent, more, those people who were herded into these risky investments late in life – Because remember, we have the baby boom, you know, heading towards their retirement homes, are going to be badly hurt at a time that they can't recover, and it will be a massive injustice that is being done by Washington and the fed to this current generation of middle class Americans. *That will produce, in my view, a political reaction, a political revolt that will begin to say, *"What's wrong here? Who believed that printing money out of thin air can make a society wealthier? Why did we do that? Who believed that we can actually create jobs and new economic output on Main Street simply by having the fed press a button and create another billion dollars?"*<br />
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*David Stockman:* Yeah, I agree with that, and the point to remember is that *massive money printing by central banks on a worldwide basis is inherently deflationary for two reasons. One, it fuels massive financial speculation. When we talk about speculation, we're talking about professional gamblers who borrow 95 cents and use that borrowed money that they pay practically nothing for to buy stocks or bonds or commodities or derivatives or biotech stocks and so forth as I indicated. All of that buying power is artificial. That is not coming from production today, real effort in the economy. That's coming from newly minted credit.*<br />
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So it takes asset prices to unreasonable, unsustainable levels. They crash, and that creates a negative economic cycle. Secondly, massive money printing makes capital and debt too cheap to the real sector of the economy. So therefore, massive capital investments are made on the basis of cheap cost of capital, not on the basis of the likely return or sustainable return over time.<br />
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*David Stockman: *Yeah, a famous American economist once said *anything that's unsustainable tends to stop*. My argument is that we're at the stop point. The fed has been printing money like there's no tomorrow really for 25 years since Greenspan took over in 1987. They are now at the point where their balance sheet has become so bloated, so enormous that even the people running the fed are confused about what to do.* They've painted themselves into a corner, and they're playing it by the day, and they're going to make a huge mistake. So the money printing thing is near an end.*<br />
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*Secondly, our political system has become totally non-functional.* We have a lame duck president who can accomplish nothing, a congress that is totally paralyzed, meaning that before 2017 at the earliest, nothing will be done about our fiscal and entitlement explosion. Finally, the American people have believed falsely that all of this is going to work out. It's not going to. *When they find out that the adults so called in Washington had no clue what they were doing, there is going to be a collapse of confidence, and that will flow into the system as well.*<br />
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So it seems like this bubble bursting is inevitable. How much time do we have? Is it years, months? How will we know? Are there some clues we can look into to make sure that we're prepared?<br />
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*David Stockman:* There's really no magic numbers here, but* it's remarkable that these central bank driven bubbles tend to peak after about six years.* The dot com bubble started really in mid-1994 with the famous Netscape IPO. It crashed in March 2000, six years. The housing bubble roughly started in 2002. It totally crashed in 2008. Six years. The meltdown on Wall Street bottomed in March 2009. Add six years. 2015. I think we're at the end of this bubble simply based on the fact that they can't expand forever. *They reach an asymptotic peak, and then confidence is lost, a catalyst occurs, a black swan appears, the selling begins, and there's nothing under this market. There is no safety net under this market.*<br />
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Is there anything that can save us?<br />
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*David Stockman:* Yes, there are, and* in the short run, that will be painful.* There will be *great dislocations, both in the financial markets and the real economy.* But in the long run, that's a good thing. We have become so dependent on government, we have come to believe that the Federal Reserve drives the economy hour by hour, day by day. None of that is historically true.* Real wealth, real prosperity comes from the sweat and from the enterprise and from the invention of people on Main Street, not the politicians on Wall Street who are on the central bank. *So I think the big inflection point that we're facing is when the big crash comes, on the other side, maybe we can get back to the private enterprise system and the kind of family self-reliance and thrift and prudence that our prosperity was built on 40 years ago.<br />
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*David Stockman: *Well in The Great Deformation, I said*, "We're heading towards a day of reckoning. This isn't sustainable."* It's happening in real time, and in the updates, what I try to do is focus on the catalyst events, the catalyzing forces that will warn us when we're really getting to the edge of the cliff.<br />
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That is the central banks. Japan's central bank is out of control. I watch that. It's important to know what happens there because if the great money printing debt experience in Japan finally fails, it's going to be noted in markets all around the world. I watch the ECB, European Central Bank. It is divided between Germans who want to try to maintain some semblance of some money and the rest of Europe that would like to print and drown themselves in debt as far as the eye can see. It's important to watch China, which is a giant house of cards, that's on the verge of collapse, and that will ricochet around the world in terms of the countries that supply it. Australia, Korea, the so-called emerging markets, and what it'll do to the theory, which I think is false that China is the engine of growth in the world, it is not. *It is the biggest speculative disaster in human history.*<br />
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*David Stockman:* Well,* the crisis is unfolding by the day. It is not too late to start preparing right noW. Now is the time to begin to save if you can and minimize your outlays for unnecessary luxuries. This is going to be a devastating crisis, and people will be happy down the road if they take the steps to prepare today.*
Reported by Zero Hedge 2 days ago.
http://www.onenewspage.com/n/Markets/754y886my/David-Stockman-Warns-It-One-Of-The.htm
MarketsSun, 01 Mar 2015 19:54:12 +0000http://www.onenewspage.com/n/Markets/754y886my/David-Stockman-Warns-It-One-Of-The.htm"Spectacular Developments" In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole "Discovered"<IMG SRC="http://047ad2fff592c294bf4a-56c3e9e74d6f60565baef0e2da093921.r33.cf3.rackcdn.com/1895-Spectacular-Developments-In-Austria-Bail-In-Arrives-After.jpg" ALT="Spectacular Developments In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole Discovered">
Slowly, all the lies of the "recovery", all the skeletons in the closet, and all the bodies swept under the rug are emerging.<br />
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Moments ago, Austrian ORF reported that there have been "*spectacular developments*" in the case of the Hypo Alpe Adria bad bank, also known as the Heta Asset Resolution, where an outside audit of Heta's balance sheet *exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the Austrian Financial Market Authority said*.<br />
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As a result, according to Reuters, the bad bank that was created in the aftermath of the Hypo collapse*, is itself about to be unwound, as the bad bank itself goes bad!*<br />
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* "Austria's Financial Market Authority stepped in on Sunday to wind down "bad bank" Heta Asset Resolution and imposed a moratorium on debt repayments by the vehicle set up last year from the remnants of defunct lender Hypo Alpe Adria."*<br />
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In short: Austria just cut off state support of what was until this moment a state-backed, wind-down vehicle and a key pillar of trust in what was already a shaky financial system.<br />
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Not surprisingly, today's shock announcement comes a week after Austria's Standard reported that up to a five billion euro impairment at Heta would take place, a report which the Finance Ministry called *"pure speculation" and noted that the Bank was in good health. *According to Standard, the reasons for the massive capital shortfall was the continuing crisis in South East Europe and the appreciation of the Swiss Franc. "*As a result, the volume of bad loans has increased significantly."*<br />
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Everyone was wondering who the first big casualty of the SNB's currency peg failure would be. We now know the answer. *<br />
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Further from Reuters, the finance ministry confirmed this in a statement, adding Heta was not insolvent and that debt guarantees by Hypo's home province of Carinthia and the federal government were unaffected by the move.<br />
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The problem is that going forward that nobody knows who insures what, what various other state and quasi-state guarantors suddenly unclear as to who is responsible for what: the province of Carinthia guarantees back €10.7 billion worth of Heta debt. The federal government backs a 1 billion euro bond issued in 2012 that the ministry said would be honored in full.<br />
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As a result of the "sudden" capital deficiency, there will be a moratorium on repayment of principal and capital lasts until May 31, 2016, giving the FMA time to work out a detailed plan to ensure equal treatment of all creditors, the FMA said in a decree published on its website.<br />
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Perhaps a badder bank to rescue the bad bank?<br />
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According to Reuters calculations, More than 9.8 billion euros worth of debt is affected, including senior notes worth 450 million due on March 6 and 500 million on March 20.<br />
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But the punchline, is that while the world was waiting for Greece to announce capital controls, or a bail-in over the past week, it was none other than one of the Europe's most pristeen credits (one which until recently was rated AAA/Aaa) that informed creditors a bail-in is imminent: "*The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden.*"<br />
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Bloomberg confirms that the ministry announced that under new EU rules means creditors can be forced to share losses.<br />
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Of course, this being Austria, and the Creditanstalt, aka the bank which failed in 1931 under almost identical circumstances and set off the dominos that led to a global financial crisis which in turn bank fanned the flames of the Great Depression, also being Austrian, suddenly everyone is asking: "what just happened and what happens next?"
Reported by Zero Hedge 2 days ago.
http://www.onenewspage.com/n/Markets/754y885f7/Spectacular-Developments-In-Austria-Bail-In-Arrives-After.htm
MarketsSun, 01 Mar 2015 18:14:10 +0000http://www.onenewspage.com/n/Markets/754y885f7/Spectacular-Developments-In-Austria-Bail-In-Arrives-After.htmPolish holders of Swiss franc mortgages chide banks in Warsaw protestPolish holders of Swiss franc mortgages chide banks in Warsaw protest
Reported by ajc.com 3 days ago.
http://www.onenewspage.com/n/Business/754wkod19/Polish-holders-of-Swiss-franc-mortgages-chide-banks.htm
BusinessSat, 28 Feb 2015 16:23:52 +0000http://www.onenewspage.com/n/Business/754wkod19/Polish-holders-of-Swiss-franc-mortgages-chide-banks.htmDid the Dollar Get its Groove Back?<IMG SRC="http://8fe73536c79414fb7080-73691611cf08f2a8a3b6c6c40efd1185.r45.cf3.rackcdn.com/1895-Did-the-Dollar-Get-its-Groove-Back.jpg" ALT="Did the Dollar Get its Groove Back?">
The US dollar traded higher against most of the major currencies over the past week. No thanks to Yellen's testimony before Congress. Market participants took away from her a reduced chance of a mid-year rate hike.<br />
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We disagree with the interpretation, seeing her comments as 1) playing down lowflation as transitory and 2) seeing the global influence being overall balanced as the decline in oil prices and interest rates offset the dollar's appreciation. We continue to expect the FOMC to drop its "patient" forward guidance at its mid-March meeting. <br />
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The main impetus for the dollar appeared to come from the sharp drop in European interest rates. Germany auctioned five- and seven-year bonds with a negative yield. Record low 10-year yields were recorded in at least eight eurozone members. This includes Ireland's 10-year benchmark yield falling below 1% and Portugal's 10-year yield falling below 2%. Spread compression continues. It is being driven by anticipation of the ECB's sovereign bond purchases. <br />
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The ECB's bond buying program is expected to be launched after next week's policy making meeting (in Cyprus). It still appears to be some necessary technical and legal details to be worked out before the Eurosystem can begin implementing the new program. <br />
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The Dollar Index held support seen near 94.00 and moved within spitting distance of the high set in late-January just above 95.50. The MACDs are poised to cross higher, as are the slow Stochastics, but the RSI is neutral. On balance, we view the consoldiative phase in recent weeks as building a base for a new leg up. <br />
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Over the past month, the market tried several times to push the euro through the $1.15 level. It failed. Previous support in the $1.1265 area may now offer resistance. It is difficult to talk about strong support. The push below $1.1l in late-January was brief. That area remains the next immediate target, but we suspect the $1.10 area may be more important psychologically. <br />
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We often argue that the dollar-yen is a range-bound currency, and when it looks like it is trending, it is moving from one range to another. It has been in narrowing range since December. Indeed, the January range was inside the December range, and the February range was inside the January range. The technical indicators that we use do not give us much hope of a near-term break of the JPY118-JPY120.50 trading range. On the medium-term, we continue to anticipate an eventual upside break. <br />
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The technical tone of sterling remains constructive. Since pushing above the 20-day moving average on February 3, sterling has stayed above it and managed to poke through $1.55 for the first time since the start of the year. Although it failed to establish a foothold above there, we do not think the market has given up on it. Our reading of the technicals suggests that there may be one more leg up that could get sterling closer to $1.56. Firm PMI readings in the week ahead could help solidify expectations that the BOE will be the next major central bank to hike rates after the US. <br />
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Over the past two weeks the dollar has tested its 100-day moving average against the Swiss franc. It is found near CHF0.9550, and the dollar has stalled. Technical indicators are not generating strong signals. The key potential key reversal on February 20 did not spur any follow through dollar selling. Recall that the euro also posted a key reversal on February 20. The euro did not make a new high and spent most of the week within the February 20 range. The euro has held above CHF1.05 since February 13. <br />
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The US dollar has been carving out what appears to be a consolidative triangle pattern throughout February. The bottom of the triangle is fairly flat around CAD1.2350. The down sloping top of the triangle comes in near CAD1.25 by the end of the week. The key drivers may be whether the Bank of Canada takes out additional insurance next week by cutting rates again and whether oil prices recover further. A strong US employment report at the end of the week could renew speculation of a Fed hike in June. We anticipate a break out to the upside but are also aware that the pattern is notorious for false breaks. <br />
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Ideas that the Reserve Bank of Australia may not cut rates next week helped to briefly push the Aussie through $0.7900. However, weak capex has kept the OIS, and forward markets nearly evenly split. If the RBA does not cut rates in March, it will simply raise the conviction levels that a cut will be delivered in Q2. A number of participants expect two cuts to be delivered. We are more inclined to sell into Aussie gains, which the technical indicators still are consistent with, toward $0.7940-50 on ideas that resistance around $0.8000 will be formidable. <br />
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The April crude oil futures contract (WTI) spent the month in February in a wide but clear trading range. The bottom around $47.50 was approached at the end of last week. The upper end of the range is near $55. Many participants are suggesting a key low is in place and appear to be better buyers on pullbacks. The MACDs are turning down. The slow Stochastics are falling but in neutral territory. The RSI is neutral. Prices need to rise above $51.50 to be anything noteworthy. <br />
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US 10-year Treasury yields rose from 1.64% at the start of February to a high of 2.16% on February 18. The push down to 1.92% at the end of last week nearly retraced 50% of the increase in yields. Key to the outlook is the US jobs report, which the ADP estimate steals much of the thunder. The yield can rise toward 2.07-2.10% ahead of the data. <br />
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The S&P 500 set new record highs on February 25 just shy of 2120. The MACDs and slow Stochastics warn of the loss of upside momentum. The RSI is more neutral. Since closing above 2100 on February 20, this has become support. Our reading of the technical condition suggests risk of a pullback into the 2080-2090 area, which would not damage the larger constructive tone. <br />
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Observations from the speculative positioning of the futures market:<br />
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1. For the second consecutive week, there were no significant position adjustments among speculators in the currency futures, which we define as a shift of at least 10k contracts in the gross position. The gross short euro position was the closest at 9.5k contracts were covered, leaving 223.2k open. The gross short euro position has fallen by about 21k contracts this month as the downside momentum faded.<br />
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2. To the extent that there was an overall pattern, speculators reduced gross short positions in the majors and added to them in the dollar-bloc and peso. Gross long positions were mostly added to, with the exception of the euro and the Australian dollar, both of which fell by less than 2k contracts. This is consistent with the consolidative tone seen in the spot market.<br />
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3. Although the week to week gross position adjustments in February has been modest, the adjustment have trended. This was the third week that the net short euro position has fallen. It has been driven more by short covering that bottom picking. The net short yen position has been reduced for six consecutive weeks. At -47.5k, it is half of the size it was at the start of the year. The net short sterling position extended its falling streak to five weeks. It has been halved since the end of January to 21.9k contracts.<br />
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4. The net short 10-year Treasury futures position swelled to 110k from 67.2k contracts. However, the gross short position hardly changed. It slipped by 500 contracts to 469.8k. What happened was the longs jumped out: The gross long position fell 43k contracts to 360k.<br />
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5. The net long speculative light sweet oil futures position fell by nearly 10% to 270k contracts. The bulls and bears saw things they liked. The bulls added 12.2k long contracts to give them almost 491k. The bears added 41.7k short contracts giving them 221k.
Reported by Zero Hedge 3 days ago.
http://www.onenewspage.com/n/Markets/754wkocmg/Did-the-Dollar-Get-its-Groove-Back.htm
MarketsSat, 28 Feb 2015 15:50:06 +0000http://www.onenewspage.com/n/Markets/754wkocmg/Did-the-Dollar-Get-its-Groove-Back.htmChina Cuts Interest Rates, Takes Number Of Central Banks Easing In 2015 To 21<IMG SRC="http://8fe73536c79414fb7080-73691611cf08f2a8a3b6c6c40efd1185.r45.cf3.rackcdn.com/1895-China-Cuts-Interest-Rates-Takes-Number-Of-Central.jpg" ALT="China Cuts Interest Rates, Takes Number Of Central Banks Easing In 2015 To 21">
And then there were 21.<br />
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Hours ago on Saturday, the country whose currency is largely pegged to the dollar which itself is now anticipating a rate hike in the coming months, surprised the world by confirming its economic slowdown yet again following a recent rate cut just this past November when it lowered its benchmark rate by 40 bps, after it again cut benchmark lending and deposit rates by 25 bps starting on March 1. Specifically, the PBOC will lower the one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.<br />
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From the PBOC announcement:<br />
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People's Bank of China decided to cut financial institutions RMB benchmark lending and deposit interest rates since March 1, 2015. The one-year benchmark lending rate by 0.25 percentage point to 5.35%; year benchmark deposit rate by 0.25 percentage points to 2.5%, while the combination of market-oriented reforms to promote the interest rate, the upper limit of the floating range of interest rates on deposits of financial institutions by the deposit base 1.2 times to 1.3 times the interest rate adjustment; adjusted lending rates and individual housing provident fund deposit and other deposit and lending rates.<br />
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As the WSJ notes, "the latest move took place just as China’s legislature, the National People’s Congress, prepared to gather Thursday for its annual meeting. The gathering is usually when China unveils its economic growth target for the year. Last year’s growth of 7.4% came in just below the 2014 target of about 7.5%. It was the lowest growth rate in nearly a quarter century."<br />
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However, just so the rate cut is not seen as being, well, a rate cut and an easing shift to China's monetary policy especially considering that the November rate cut did absolutely nothing to boost China's all important housing market, the PBOC was quick to note that the second rate cut in 4 months is "to keep real interest rates at level to adapt to economic growth, prices, employment trends, and does not represent a sound monetary policy changes. China's economic development has entered a new normal, and development conditions and development environments are changing, and its core is to change the way of economic development and economic structure."<br />
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In other words, when is a rate cut not a rate cut? When it's in China. The PBOC also provided the following stock announcement explaining what happens next:<br />
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Next, we will continue to follow the CPC Central Committee and the State Council, the strategic plan, adhere to the general tone of the work while maintaining stability and macroeconomic policy should be steady, micro policies to live the general idea, more actively adapt to the economic development of the new normal, the transfer and adjustment structure in a more important position, maintain the continuity and stability of policy and continue to implement a prudent monetary policy, pay more attention to an appropriate degree, comprehensive use of various monetary policy tools, *timely and appropriate fine-tuning for the adjustment of economic structure and the transformation and upgrading Moderate to create a neutral monetary and financial environment, and promote economic science and sustainable development. *At the same time, more focus on innovation, blending in regulatory reform among the tight monetary policy combined with the deepening of reform, timely for businesses and individuals through the introduction of certificates of deposit, etc., continue to expand the financial institution independent pricing space, orderly interest rate reform and further improve the rate-control system, improve the interest rate transmission mechanism and constantly enhance the ability of the central bank interest rate regulation and macro-control effectiveness.<br />
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Said otherwise, a whole lot of reform promises. Kinda like Greece. Of course, what is not said is that as long as the Fed keeps threatening to and eventually actually hiking rates, not to mention the global economic contraction persists, China will have no choice but to engage in non-monetary, non-policy rate cuts for the indefinite future.<br />
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Here is Goldman's recap of what China did:<br />
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The People's Bank of China (PBOC) announced that benchmark lending and deposit rates will both be cut by 25 bps, effective from March 1. In addition, the deposit rate ceiling will be raised from 1.2 times to 1.3 times the benchmark interest rates, which effectively lowers the maximum deposit rate by 5 bp from 3.3% pa to 3.25% pa.<br />
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*Economic growth is widely viewed as weak in early 2015, despite modestly better HSBC flash PMI data for February*. The *official PMI data to be released tomorrow (which should be known to senior government officials at this point and may well have remained below 50) might have been one factor behind the decision to cut now.* The central bank also has a tendency not to take major policy actions during the CPPCC and NPC, which will start on March 3 and close on March 15. Waiting until after those events would have then implied more than two full weeks of delay.<br />
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The decision to cut benchmark interest rates again has been widely expected by the market (including us). There was also some speculation that the deposit rate ceiling would be increased. While the raise in the ceiling did come about, we believe a larger cut to the benchmark deposit rate arguably would have been more desirable as it could help lower funding costs more broadly in the economy. The increase in deposit rate ceiling is also a small further step towards interest rate liberalization. *The cut to the benchmark lending rate is also smaller than the last cut in November (40 bps). This may make some observers view the move as cautious. *<br />
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*We expect further policy loosening in the coming months. The next move is likely to be a RRR cut, likely in 2Q, but a cut towards the end of 1Q cannot be ruled out (RRR cut is also a tool of liquidity management). *Further benchmark interest rate cuts are also possible. The government is also loosening other policies such as *allowing the exchange rate to depreciate modestly against the USD and stepping up infrastructure investments*. These measures will likely provide some support for short-term growth, though the cautious nature of the measures so far may raise some questions in terms of whether the economy will experience a rebound as significant as the one seen in Q2 2014.<br />
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In conclusion, expect markets to soar even more on Monday while China continues to stealthily devalue the Renminbi in order to fight a housing market collapse that is now worse than what the US experienced after Lehman failed.<br />
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And for all those asking, here is the revised list of now 21 countries who have cut interest rates in just the first 2 months of 2015:<br />
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For those asking, here is the full, updated list of 20 central banks easing so far in 2015 courtesy of Reuters:<br />
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*1. Jan. 1 UZBEKISTAN*<br />
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Uzbekistan's central bank cuts its refinancing rate to 9 percent from 10 percent.<br />
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*2. Jan. 7/Feb. 4 ROMANIA*<br />
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Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25 percent. Most analysts polled by Reuters had expected the latest cut.<br />
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*3. Jan. 15 SWITZERLAND*<br />
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The Swiss National Bank stuns markets by scrapping the franc's three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent.<br />
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*4. Jan. 15 INDIA*<br />
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The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75 percent and signals it could lower them further, amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s.<br />
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*5. Jan. 15 EGYPT*<br />
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Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.<br />
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*6. Jan. 16 PERU*<br />
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Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.<br />
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*7. Jan. 20 TURKEY*<br />
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Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.<br />
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*8. Jan. 21 CANADA*<br />
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The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.<br />
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*9. Jan. 22 EUROPEAN CENTRAL BANK*<br />
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The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September next year, and perhaps beyond.<br />
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*10. Jan. 24 PAKISTAN*<br />
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Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.<br />
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*11. Jan. 28 SINGAPORE*<br />
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The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has "shifted significantly" since its last review in October 2014.<br />
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*12. Jan. 28 ALBANIA*<br />
Albania's central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.<br />
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*13. Jan. 30 RUSSIA*<br />
Russia's central bank unexpectedly cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.<br />
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*14. Feb. 3 AUSTRALIA*<br />
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.<br />
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*15. Feb. 4 CHINA*<br />
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation.<br />
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*16. Jan. 19/22/29/Feb. 5 DENMARK*<br />
The Danish central bank cuts interest rates a remarkable four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.<br />
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*17. Feb. 13 SWEDEN*<br />
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds<br />
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*18. February 17, INDONESIA*<br />
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years<br />
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*19. February 18, BOTSWANA*<br />
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.<br />
The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.<br />
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*20. February 23, ISRAEL*<br />
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The Bank of Israel reduced its interest rate by 0.15 percentage points, to 0.10 percent in order to stimulate a return of the inflation rate to within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.<br />
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*21. February 28, CHINA*<br />
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The People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.
Reported by Zero Hedge 3 days ago.
http://www.onenewspage.com/n/Markets/754wkob5h/China-Cuts-Interest-Rates-Takes-Number-Of-Central.htm
MarketsSat, 28 Feb 2015 14:03:02 +0000http://www.onenewspage.com/n/Markets/754wkob5h/China-Cuts-Interest-Rates-Takes-Number-Of-Central.htm